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Oil producers - Nov 19

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Dilemma over spending of petrodollars
Mountains of cash … how to utilize it?

Kamel Al-Harami, Arab Times (Kuwait)
The challenge facing all oil producing countries is how to utilize the mountains of excess cash generated by oil income. The oil income of the Organization of Petroleum Exporting Countries (OPEC) is expected to reach $700 billion by the end of this year with Saudi Arabia’s daily income close to $1 billion and the rest of Opec members income for 3-7 days $1 billion and Kuwait $1 billion every 5 days. With such vast accumulated cash the challenge is how best to benefit and utilize the generated cash for the welfare of all.

Without doubt some of the income will be mismanaged and misdirected and bound to go astray particular in countries where the book-keeping and balance sheet don’t exist. We in Kuwait are fortunate that we don’t belong to that part of the world, and our expenses are regularly scrutinized by the State Audit Bureau and the National Assembly. The unexpected sudden increase in oil prices which has climbed to historical highs is causing us great confusion how to spend it but wisely. On short term basis the excess cash must be invested overseas until oil countries come with long-term invested plans, because their local economies are unable to absorb daily income. This warrants entry and opinions of the major financial institutions.

We in Kuwait seem to have run out of ideas for the time being and our past generations were more creative and looked deeper into our human resources to give their best. The overseas investments have their limits and it is time to seriously think of ways of making and creating new job opportunities for our youngsters and improve their capabilities and abilities.

Kamel Al-Harami is an Independent Oil Analyst
(18 ? November 2007)
It's a question for everyone - how to invest the one-time wealth from fossil fuels. Future generations will curse or bless our names, depending on what we do. -BA


Brazil, the New Oil Superpower

Joshua Schneyer, Business Week
State-run Petrobras' "monstrous" new oil find has wide-ranging implications for the South American country, the oil majors, oil services providers, and beyond
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In a recent radio broadcast, Brazil's President Luiz Inácio Lula da Silva said he's convinced a "higher power" has taken a shining to Brazil. That, he said, might explain the providence of state-run oil company Petrobras (PBR), whose colossal new oil discovery could transform Brazil from a barely self-sufficient producer into a major crude exporter.

Petrobras announced Nov. 8 it has found between 5 billion and 8 billion barrels of light oil and gas at the Tupi field, 155 miles offshore southern Brazil in an area it shares with Britain's BG Group and Portugal's Galp Energy. Tupi is the world's biggest oil find since a 12 billion-barrel Kazakh field was discovered in 2000, and the largest ever in deep waters. Perhaps more important, Petrobras believes Tupi may be Brazil's first of several new "elephants," an industry term for outsize fields of more than 1 billion barrels.

Initially, Tupi will produce about 100,000 barrels a day but may ramp up to as much as 1 million before 2020—more than the biggest U.S. field in Alaska's Prudhoe Bay, says Hugo Repsold, Petrobras' exploration and production strategy manager. "It's monstrous," says Matthew Shaw, a Latin America energy analyst at consultant Wood Mackenzie in London.

Given the discovery's magnitude, Tupi already is changing how Brazilians think about their oil riches. It even tempts the kind of oil nationalism that has prompted Venezuelan President Hugo Chávez to expropriate oil reserves and production infrastructure in Venezuela from oil majors ExxonMobil (XOM) and Chevron (CVX).
(19 November 2007)
Related from the New York Times: Brazil Discovers an Oil Field Can Be a Political Tool.


Antarctica, the new hot real estate

Zoe Cormier, the Star
There's oil and gas in the Antarctic, too, which global warming may open up. But as the U.K. and others stake claims, scientists wonder what it would cost environments there, and ultimately the planet
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LONDON - As Russia, Canada and Denmark roll up their sleeves and flex their muscles over the Arctic and North Pole, planting titanium flags on the ocean floor and planning new military bases around the Arctic Circle, a similar drama is unfolding at the opposite end of the Earth.

Britain is considering submitting data to the United Nations Commission on the Limits of the Continental Shelf (CLCS) that would give the U.K. exclusive economic rights to over a million square miles of seabed off the coast of its Antarctic territory. Australia has already put in their own claim to the seabed off their Antarctic territory, and there is little doubt the other five nations that claim a slice of the continent - Norway, Argentina, Chile, France, and New Zealand - will do so as well by a 2009 deadline.

...The motivation lies deep under the sea floor: minerals, oil and gas. It is now nearly impossible to drill in Antarctic waters, mainly because the weather is so severe.

But there may come a day when oil rigs start firing up - perversely because global warming, caused in part by burning fossil fuels, is rendering the Antarctic environment more hospitable to exploration.
(18 November 2007)


The Cowardly Giants
Bottom line obsessed, Big Oil is forsaking the future.

Amy Myers Jaffe, Newsweek
The last time the world faced a major petroleum crisis, in the 1970s, the leading multinational oil companies helped soften the blow. Big Oil went on a drilling spree, finding giant new oil and gas fields outside the control of the Organization of Petroleum Exporting Countries (OPEC) in places like Alaska, the North Sea, Australia, Colombia and elsewhere. Non-OPEC production exploded in the 1980s, putting OPEC on the defensive and slashing costs.

Today, however, with prices approaching $100 a barrel, Big Oil has failed to ride to the rescue. The leading multinationals have grown too timid to spend aggressively on oil exploration-even at a time of record oil prices. Unless Washington adopts a new national energy strategy and finds way to pressure the majors into changing tactics, Big Oil-and the United States-could face serious trouble ahead.

A study by Rice University released last week reveals the depths of the problem. By analyzing the spending patterns of the 25 largest oil companies, we discovered that exploration spending by the "Big Five"-BP, Chevron, ConocoPhillips, ExxonMobil and Royal Dutch Shell-fell from $9.8 billion in 1997 to $6.1 billion in 2005 (before rebounding in 2006), despite a fourfold increase in operating cash flow.
(26 November 2007 issue)

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